Un-equal Kashmir

BILAL HUSSAIN


'The rich getting richer, poor getting poorer in Jammu and Kashmir' Associated Chambers of Commerce and Industry of India's (ASSOCHAM) analyzed in its recently published report 'Rural Development in India: State Level Experiences'.

The study has renewed the attention in increase in economic inequalities in the state. The report has used a common yardstick that is the Gini coefficient, which runs from 0 (everyone has the same income) to 1 (one person has all the income).

According to the study between 2004-05 and 2009-10 the inequality (Gini coefficient) in rural India has marginally increased from 0.264 to 0.274. While, Gini coefficients for states indicate that income inequalities have increased in Jammu and Kashmir (J&K) by 7.37 percentage points, Madhya Pradesh including Chathisgarh by 4.96 percentage points and Bihar including Jharkhand by 4.9 percentage points. These are followed by Assam, Tamil Nadu, Punjab, Gujarat, Himachal Pradesh, Kerala and U.P. (incl. Uttarakhand).

However, Gini coefficient values indicate falling inequalities in Odisha by 5.75 percentage points, Maharashtra by 3.85 percentage points, Haryana by 2.36 percentage points, and West Bengal by 2.34 percentage points. Also, Union Territories, Rajasthan, Andhra Pradesh, North eastern States and Karnataka too have seen some fall in the degree of income inequality.



Does it matter?

On analyzing the pattern of Gini coefficient at global level most countries range between 0.25 and 0.6. The Gini coefficient has gone up a lot in some rich countries since the 1980s. For American households it climbed from 0.34 in the mid-1980s to 0.38 in the 2000s. In China it went up even more, from under 0.3 to over 0.4. But this was not universal. For decades, Latin America had the world’s worst income inequality. But Brazil’s Gini coefficient has fallen more than five points since 2000, to 0.55. And as poor countries are on average growing faster than rich ones, inequality in the world as a whole is falling. Going by the above world over statistics, it is something to be looked at state level.

It seem to qualify one of the commonest justifications for being relaxed about inequality: that it is not a big concern if the rich are getting richer so long as the poor are doing well too.

However, inequalities does affect people’s quality of life and their well-being. That leads to a second reason for worrying about inequality: its physiological and physical consequences.



Drawbacks

Gini coefficient suffers from a few disadvantages. The index of unlike sets of persons cannot be averaged to find the Gini coefficient of the total population on the sets. A coefficient for each individual will result in a value of zero. A big state with a diverse economic map like that of J&K will result in a much higher Gini index compared to calculations of each region within that state.

Lorenz curve may downplay the real inequality amount if richer households are capable of using money more efficiently. States having similar incomes may exhibit similar Gini coefficients even if they have dissimilar distributions of income. This is due to the fact that Lorenz curves may show unlike shapes and still exhibit alike Gini coefficient.

It is sometimes argued that one of the disadvantages of the Gini coefficient is that it is not additive across groups, i.e. the total Gini of a society is not equal to the sum of the Ginis for its sub-groups.



Revelations

The J&K has seen highest rise in the Monthly Per Capita Consumption Expenditure (MPCE) of 20 per cent richest households across the state. There are wide differences in state-level MPCE values. In the year 2010, Kerala, Union Territories, Himachal Pradesh, Punjab and Haryana, in that order, have the highest average MPCE in rural areas. Contrary to this, the rural areas of Madhya Pradesh, Orissa, Uttar Pradesh (including Uttarakhand), and West Bengal have got the lowest MPCE in rural areas. Average Monthly Per Capita Consumption Expenditure across states during 2009-10 for Kerala was Rs 312, for HP it was Rs 276, for J&K it was Rs 217 and for all India average it was Rs 169.

If we consider the change in the average per capita monthly consumption expenditure that took place between 2005 and 2010, Kerala (18.6%), Himachal Pradesh (16.5%), Andhra Pradesh (15.8%), Orissa (15.4%), and Tamil Nadu (15.4%) have performed better than other states.

On the other hand, five states performed worse than the national economy. These are: Karnataka (3.9%), J&K (3.8%), Assam (3.1%), Rajasthan (1.8%), Madhya Pradesh including Chattishgarh (1.5%). Apart from this, two states viz., Haryana (-0.4%), and Bihar (-1.5%) have registered negative growth. Such a skewed performance certainly leads to the aggravation of inter-state economic disparities. Main factors contributing to widening of such disparities are the variation in the state of agriculture sector across states as well as inter state differences in the effectiveness of the government's social safety net programs.

Change in average Monthly Per Capita Consumption Expenditure Across States that witnessed the MPCE of their poorest 20 percent households shrunk. Union Territories -8.0 , Rajasthan -7.1 , Haryana -4.8 , M.P. (incl. Chathisgarh) -4.8 , Karnataka -3.7 , Bihar (incl. Jharkhand) -2.3 , J&K -1.2 , and Pubjab -1.2 are such states. On this front, the Union Territories , Rajasthan , Haryana , M.P, Karnataka, and Bihar have performed worse than J&K.

The change in the MPCE of the richest 20 percent people across states over the five year period between 2004-05 and 2009-10. In this category, J&K scores 22.6 state has seen the highest rise in the MPCE of its richest households. Kerala scores 19.8 and Himachal Pradesh scores 18.8 followed J&K. On the other hand, monthly per capita consumption expenditure of the richest category of rural people in the states of Karnataka -8.9, Haryana -5.9, Maharashtra -4.2 and Rajasthan -2.9 has shrunk. For J&K this is something to be worried for.

Summing up

The greater inequality can happen either because the wealthier are getting wealthier, or the poor are falling behind, or both. Decreasing income inequality in countries help accelerate economic and human development.

The policy makers and politicians should focus on investments in the social sectors, like schools and health facilities, and critical economic infrastructure such as power, irrigation and water management systems, land development, state highways and district and rural roads. Differences in growth across states are caused by differences in management. Some states are better managed and therefore able to create an environment, which generates higher growth. The quality of governance can help stimulate growth. The stern revelations by the study should act as a wake up call for the people who are in power and matter most in the state. The two decade long conflict can no way be accepted as a reason for this outcome rather it is vice-versa: it is because of these inequalities that has pushed people to walls. Along with achieving higher economic growth, more efforts should be made to make it more inclusive.